WP Tweet Note: New access to an old securities exchange?

WP Tweet Note: New access to an old securities exchange?

Anne Szustek, content editor with Institutional Investor magazine in New York, tweeted about change at the Tadawul, Saudi Arabia’s stock market. Here’s why you should care.

Foreigners currently own less than 5% of the Tadawul.

Sometime in the first half of 2015, regulators in Saudi Arabia will begin to allow foreigners to buy and sell stocks listed on the Tadawul, the largest stock exchange in the Middle East. Saudi Arabia is the region’s biggest economy. It could be added to MSCIs emerging markets index as early as mid-2016. If so, estimates suggest Saudi Arabia would be weighted at 4% of the index’s overall portfolio.

How big is the Saudi stock market?

According to Institutional Investor, the Tadawul All Share Index has more than 160 companies with a market cap in excess of $560 billion. That puts it seventh amongst 58 emerging- and frontier-markets. Its average daily volume – $2.4 billion – is greater than both Russia and South Africa.

You might cringe at the thought of investing in Saudi Arabia but the diversification available is much wider than what Canada offers (i.e. not just energy and financials) its investors. Interestingly, there are no oil companies listed on the Tadawul, an ironic twist given Saudi Arabia is the world’s largest producer of oil.

Have a look at the sector representation for the index and you’ll notice that with the exception of energy and utilities, all 15 sectors have at least three or more companies included in their holdings.

Institutional Investor contributor Julie Dickson points out that approximately 50% of Saudi Arabia’s population are younger than 30 and just 3% are older than 65. As a consequence, consumer discretionary spending is on the rise with a growth in spending that’s second to none in emerging markets.

To sum up an investment in Saudi Arabia and the rest of the Gulf Cooperation Council states, Investcorp managing director Ramzi AbdelJaber suggests, “The GCC has been a tremendous growth story over the past decade. Businesses are growing tremendously.”

It should be an exciting time in 2015 when it comes to Middle East investments.